A FAIR DISTRIBUTION
OF WORK: An equity issue of the 21st century
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Comparison between Curtin and Howard
John Curtin was a Leader who provided strong leadership for Australia at a critical time. At the same time, he initiated the process of social and economic reform in Australia which looked forward to the postwar reconstruction challenge.
Therefore, we can immediately see three distinguishing criteria between John Curtin and John Howard.
First and foremost, John Curtin provided leadership when it was required. That is a stark contrast with the current incumbent.
Second, John Curtin looked ahead to the challenges of the future beyond the immediate and the popular. It is hard to imagine John Curtin failing to confront the hard decision because the opinion polls were questionable!
A third distinguishing criterion might also be added. After all, one thing you could always say about John Curtin was that, in great issues of national significance, he was able to maintain a principled position. A stark contrast with John Howard.
An example of the breadth of Curtin's forward looking agenda is reflected by the fact that in the last weeks of his life, in the last weeks of the Curtin Government, the full employment paper was released. The full employment paper would have been important at any time but it is important to remember that the issue of full employment was recognised as the equity issue of the generation.
The Employment Challenge
What I want to look at today are some issues concerning the role of Government in dealing with one of the equity issues of the next generation, which relates to the way we deal with Australia's unemployment problem. This equity issue of the 21st century, what may well prove to be the equity issue of the next generation, is the issue of the fair distribution of the available work.
To put this in context, it is important to briefly review the basic issues of the conventional assessment of the employment challenge.
Conventional assessment has tended to look first at the demand side of the labour market. We all know we need economic growth and to focus on its linkage to job creation.
Such assessment also focuses on issues like the need for industry policy and its impact on the rate of economic growth, the nature of that growth, and the number and type of jobs which might be created.
There are many other demand side issues emerging which need attention such as our export performance and the higher growth path which the nation can sustain as a consequence of the improved export performance achieved by the previous Government.
On the supply side, increasing priority is being given to issues related to employment and training and investment in human capital; to issues concerning the balance between achieving greater flexibility of the labour market and the need for a proper social concern about fairness; issues of productivity and special issues such as youth wages where the Government is trying to perpetuate a view that the abolition of youth wages would have destroyed hundreds of thousands of youth jobs.
This is an argument not dissimilar to the attitude expressed by conservatives to the issue of equal pay in its early stages. At that stage the conservatives purported to oppose equal pay to defend the interests of women because they claimed to fear that women would not be employed if they had to be paid the same wage as men.
Additionally, there have been significant changes to the nature of the workforce including the increased participation of women in the labour force, the increase in part-time and casual work, and the increased participation in higher education which is leading to later entry into the workforce of many workers.
This is not designed to cover comprehensively the issues of supply and demand in the labour market--rather to provide a background to enable analysis of an important emerging issue. I want to concentrate in particular on the distribution of work.
Distribution of Work
The evidence suggests that the distribution of work in modern western economies is becoming increasingly unfair and the indicators suggest that the trend towards enterprise bargaining and individual contracts exacerbates that unfair distribution.
In Australia, as in other OECD countries, the distribution of available paid work is becoming increasing concentrated. With unemployment at just under 9% and underemployment, by which I mean the number of part-time workers who would prefer full-time work, at 5.7%, Australians are feeling the effects of this unfair distribution of work.
While the amount of paid work per head of the civilian population has declined slightly since the 1960s, from 23.1 hours per week in 1966 to 20.6 hours in 1996, the problem is not simply that there is less work available. There has been a fundamental shift in the distribution of paid employment. The total amount of paid work is being spread across a proportionally smaller group of Australians, who are working longer and harder as a result. Therefore, while there are increasing numbers of Australians without work or without enough work, those who do have work are working longer hours and more overtime.
In short, we are facing the paradoxical situation in which the phenomena of overwork and underwork are occurring simultaneously.
This same paradox was noted at the height of the 1930s Depression by the English philosopher Bertrand Russell, who remarked that while unemployment levels were high, those in employment were working longer and harder than ever.
For example, while over 1,300,000 Australians are either unemployed or underemployed, full-time employees are now working 42.2 hours a week, in comparison to 39.9 hours a week in 1989. This is an increase of 2.3 hours, or just under 6%, over seven years. As at August of this year, one in five employees are working over 49 hours a week, and in a recent survey by Morgan and Banks 34% of respondents reported working between 50 and 59 hours a week.
Additionally, just under half of all full-time employees are working overtime on a regular basis, 35% of whom are not being paid for that extra work.
To do a quick sum; if each of these full time employees had worked a standard 38 hour week, which is only 4.2 hours less a week, then approximately 26 million (26,185,200) hours of work per week could have been made available and 689,084 full-time jobs could have been created to work these additional hours, which is equivalent to 85% of our unemployment.
While it is not as simple a matter as substituting people for hours, the figures illustrate the effect of the distribution of work on employment and unemployment.
This overwork/underwork paradox has significant corresponding implications on the distribution of income, which itself is economically and socially significant. Beyond this, the unfair distribution of work also has both long term as well as immediate social consequences, particularly on the intergenerational issues of a cycle of unemployment. The unemployed miss out on the social interaction, status, skill acquisition, security, self-esteem and identity that goes with employment.
For those in paid employment, the longer hours they are being required to work are accompanied by increases in stress, work effort and a decline in the satisfaction with the balance between work and family. Of the 11,000 employees surveyed by the Federal Department of Industrial Relations in 1995, a majority reported that the stress in their job, and the effort required for their job, had increased over the previous 12 months.
Disturbingly, 26% of those surveyed reported that their satisfaction with the balance between work and family had gone down over the previous 12 months. Given the trends which indicate that work is also becoming unevenly distributed between families, with increasing concentration of jobs in some families and unemployment in other families, this has become a pressing issue for the Australian community.
It also has profound public health and worker's compensation consequences in terms of workplace stress. But those are issues for subsequent consideration.
To add to the paradoxical nature of the work distribution issue, we are now seeing more full-time employees reporting that they would prefer to work fewer hours. A recent telephone survey jointly conducted by the Australian Centre for Industrial Relations Research and Training and Newspoll found that 33% of full-time workers would prefer to work fewer hours. It is an absurd situation to have so many people wanting more work while many others with jobs want less work.
Options for Equitable Sharing
The distribution of work is an issue that will not be easy to deal with. There are no easy solutions. But we need to start asking ourselves how we can share employment, wealth and opportunities more equitably between those who are in work and those who are out of work. This question is being considered by reformers in most countries around the world but it is being ignored by conservative governments in Australia. We need to be working now on options for reform. I don't at this stage pretend to have all the answers--it still needs more analysis and work. Today I want to traverse some of the options and issues which will need to be considered in the search for a conclusion.
It is often instructive to look at, and learn from, the international experience. In many countries, work distribution through changes to working time arrangements is being investigated as a means to reduce unemployment. The European countries in particular having already introduced large scale reforms of this nature with the explicit aim of sharing the available work amongst a larger number of people to help reduce high unemployment.
Under President Mitterand in the early 1980s, the French Government introduced a package of measures designed to redistribute the available paid work. This included shortening the standard working week from 40 hours to 35 hours, shortening the working year by granting a fifth week of paid annual leave, and shortening the length of the working life by early retirement schemes. Whilst the shorter working week option, implemented by government decree, proved to be unsuccessful, the early retirement schemes proved to be very popular. The problem with reducing the working week was that there was not enough cooperation between employers and unions. These options were all government subsidised to some extent, with the Government reducing employer's social security payments when they agreed to reduce working time.
Germany has also shortened the working week to 35 hours in the steel, printing and metal work industries, after an 11 year campaign by the German Trade Unions. Approximately 70,000 jobs were created as a result. A recent agreement concluded in Germany between IG Metall and Volkswagen has led to a four day, or 28.5 hour working week, which saved 30,000 jobs which would otherwise have been axed. In depressed industries in many countries around the world, it is increasingly common for initiatives of the Volkswagen type to be introduced in order to save jobs, rather than actually create new jobs. But either type of initiative has a positive impact on unemployment rates.
Denmark has introduced a successful practice of career breaks whereby employees take one year's break from work, to be replaced, preferably, by an unemployed person. This policy has led to a type of work rotation, which has allowed unemployed persons to rejoin the workforce, and which subsequently improves their chances for further employment. Under the scheme, longer term qualified unemployed people are given preference to replace those seeking career breaks. The Danish Employment Ministry has reported that in 1994, three-quarters of the 15,000 unemployed persons involved in the system found a steady job at the end of their replacement period.
In the Netherlands, all new positions in the public sector are limited to a maximum 32 hour week. Between 1983 and 1991, the Netherlands experienced a 30% rise in employment along with a 13% reduction in hours worked per person. Indeed, in Denmark and the Netherlands, a relatively high proportion of the population is engaged in work, with each person working a relatively small number of hours.
In the 1980s, Belgium adopted a 5-3-3 initiative, whereby enterprises were permitted to cut wages by 3% in exchange for a 5% reduction in hours, provided that recruitment was increased by 3%. Weekly hours in Belgium are set at a maximum of 50, similar to Malaysia, where maximum hours are set at 48. If this 48 hour maximum is enforced throughout the Malaysian workforce, then the example is significant because the Malaysian economy has continued to grow at rates of between 8-10% despite the hours policy, refuting the propositon that reductions or caps on hours is harmful to the economy.
Even Japan and Sweden, with relatively low unemployment levels, are investigating the working time issue as a means of improving quality of life for workers.
The most recent European proposal is the European Union Working Time Directive initiative which restricts the number of weekly hours including overtime to 48 hours, on an average over four months. The directive can be modified for certain industries or where a permanent presence is required. The directive also includes provisions on the number of consecutive rest hours required per day and per week. And last year, the major French employers' associations and unions signed an agreement allowing employees over 57 years of age who have made over 40 years of state pensions contributions to retire early. The employers then recruit an unemployed person, preferably under 26. It is expected that 100,000 people will be recruited by the end of this year.
Of all the lessons that can be learnt from the overseas experience, the most important lesson is that initiatives in this area can only be successful when there is a partnership between all parties to the issue. The partnership must include unions, government, employers and employees. The most successful of the overseas' initiatives, in terms of employment creation, have involved agreement and effort by all parties at the enterprise level. The Labor Party is the only party that can deliver this kind of partnership.
The Australian Experience
On the domestic front, there are a few initiatives such as the purchased leave scheme (48 of 52) and the career break scheme operating in the Western Australian Department of Education. Under the career break scheme, teachers work for four years, and take the fifth year as leave, pursuing study or other activities. Their salary is averaged over five years, which means that they receive 80% of their pay every year. This means that the department is able to employ a new teacher as a replacement for the fifth year, without it costing them any more.
Whilst these schemes are still in their infancy, if they achieve wide uptake they have the potential to vastly improve the quality of employees' working life and provide the opportunity to share out the work more fairly. Work distribution will also be raised in Stage 3 of the ACTU's Living Wage Claim. There is also support for the proposal that future productivity gains be taken in the form of shorter hours.
It is also important to look at what market signals the current arrangements and recent developments are sending employers when it comes to taking on new staff. Because of the costs associated with hiring and training new staff, and other fixed labour costs, it is often cheaper for employers to work their existing employees longer hours rather than take on new staff. Employers have traditionally responded to increases in demand by offering overtime, rather than putting on new staff, and it has been suggested by several commentators that this has been one of the factors contributing to high unemployment over the past decade. Overtime, even with penalty rates, gives employers the flexibility to absorb increases in demand for labour without employing new workers. The penalty rates for overtime hours are thus a significant market signal.
The Workplace Relations Bill is an interesting example of the wrong way to approach contemporary labour market challenges. The Workplace Relations Bill makes a smashing attack on the problems of the 1970s of high strikes and low productivity. It makes worse the problem of the late 1980s and 1990s to do with uncertainty and stress and it ignores the distribution of work issues which will come to the forefront more and more in the early years of the next century.
Indeed, with the emphasis on individual contracts and the dismantling of the award system, the Workplace Relations Bill is set to vastly exacerbate the current problems concerning the distribution of work.
For example, in the individual contracts operating in Victoria and here in Western Australia, there has been a trend to cash out or entirely remove penalty rates for overtime. Currently, at the Federal level, just under 9% of certified agreements contain provisions whereby overtime is paid at single rates. However, a recent analysis of 115 agreements made under the Victorian Employee Relations Act 1992 found that 35% of agreements included provisions paying overtime at single rates, and 64% of agreements had part or all of the weekend paid at single time rates. In a third of agreements, the overtime penalties were less than in the equivalent award. Furthermore, most of these Victorian agreements did not include an hourly wage increase to compensate for the abolition of the penalty rates.
These trends not only encourage, but provide incentives for employers to use overtime, rather than new staff, to absorb increases in labour demand. The Workplace Relations Bill and the move to individual contracts will have a negative impact on our attempts to achieve a fairer distribution of work.
The trend to longer hours in a more deregulated system is already evident. The June 1996 Summary of Statistics by the Western Australian Commissioner of Workplace Agreements shows that 50.5% of employees who have moved onto a Workplace Agreement now work longer hours than those contained in the applicable award.
This confirmed the conclusions of a report prepared in February 1996 for the Western Australian Trades and Labor Council by the Australian Centre for Industrial Relations Research and Training. Their study of 25 workplace agreements in Western Australia showed that in a large number of these, especially in the retail, hospitality and cleaning industries, the working week was lengthened, for example from 38 hours per week to 40, and in some cases to 42 hours a week. There was also a discernible trend to treating public holidays and Saturdays and Sundays as normal work days.
These identifiable trends to longer hours, and the removal of overtime and penalty rates, are set to be repeated under the Workplace Relations Act, when proclaimed. It is no coincidence that Western Australia and Victoria are the two states with the highest average weekly hours for full-time employees, at 43 hours and 42.5 hours a week respectively, as at August 1996.
Furthermore, the deregulation of working time arrangements that is set to occur under this Act, will have adverse consequences for individual workers in terms of the organisation of their day to day life. Predictability and regularity of hours, which is essential for workers trying to balance work and family commitments, is set to decline with the Act increasing employer discretion in the setting of hours.
This deregulation of working time arrangements will be particularly significant for women, many of whom are in casual employment, who are therefore more vulnerable to having their working hours determined by their employer. A recent report commissioned by the Human Rights and Equal Employment Opportunity Commission, and prepared by the ACTU, found that many women are being disadvantaged by having to accept employer-driven flexibility in working hours.
Work distribution options can only be implemented by a government which focuses on this issue, gives it priority and is prepared to consult with researchers in this area, with unions, employers and to examine the international experience. This is essential if we are to try to be at the forefront of distributing work more fairly.
The challenge for those of us in the Labor Party and for people in social democratic parties around the world is to develop a 21st century model of labour market relationships to deal with this emerging and serious social and economic trend. It is a challenge the Labor Party is determined to meet.
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